F&O OUTLOOK: Nifty likely to revisit 4,750

The Nifty finally did it. The index on Thursday zoomed past the 5,000-mark and closed at 5,020 on fresh buying in technology, FMCG, realty and auto stocks. The current level, in fact, shows a lot of investor optimism about the Indian markets.

The surge in US index futures and firm European markets suggest that the market will open on a positive note tomorrow.

On the short-term charts, the indices are technically highly overbought, and hence a pullback can be seen after the Nifty entered the 5,100-5,150 zone, says Gautam Shah, technical analyst at JM Financial. He expects the index to revisit the 4,700-4,750 zone anytime in the next two-four weeks before the uptrend takes it to the medium-term target of 5,550. Month October has a bad track record and hence volatility can be expected, says Shah.

The trading volume in the Nifty options suggests that the index is likely to remain range-bound in the next two trading sessions, and may even target 5,100 during intraday trade. The 5,000 put options of the September series hold the second-highest open interest (OI), and hence the current series is expected to close around this level. The Nifty October futures witnessed rollovers of 5.40 million shares. These futures were at a premium of 24 points to the spot on Thursday.

The Bloomberg data suggest that the increase in OI was mostly through buy-side trade, indicating long rollovers. However, the rollovers in the October series were considerably lower at 11.98 million shares, compared to 23.04 million shares same time last month. This means bears are expecting the index to move up further from the current level, and hence only bulls are rolling over their positions. Among the index heavyweights, good rollovers were seen in HDFC, HDFC Bank, ICICI Bank, Infosys Technologies, Larsen & Toubro, Reliance Industries and State Bank of India. This means extension of the current rally into the next month.